Order In The House

Inventory management tools are a boon for distributors and contractors alike

Running leaner, more efficient and higher-profit operations is on the mind of every electrical contractor. Imagine that your distributor has the same initiative for their warehouse inventory processes, plus the tools and expertise to streamline your orders and help make your shared goals a reality. If it sounds too good to be true, then your distributor may not be working as hard as it can for your business.

Distributors are automating their warehouses to gain more control over their greatest asset—inventory. In order to minimize their inventory investment while increasing sales in a tight marketplace, distributors are turning to innovative warehouse management technologies. In this information-rich age, knowledge is power, and implementing tools that mine, process and track critical data can provide a competitive edge. In the process, distributors are reducing operating costs and improving customer service.

“Customers have benefited from all of our technology improvements, which have allowed us to increase our fill rate and on-time deliveries. We extend these same efficiencies to our customers’ own storerooms or on-site construction trailers,” said Bob Crawford, vice president of operations for United Electric Supply.

Savvy solutions

At their root, automation technologies are designed to standardize the process of accurately tracking the flow of materials with minimal errors and as little duplicate data entry as possible

Steve Epner, president of Brown Smith Wallace Consulting Group in St. Louis, Mo., said that in the ’60s and ’70s, only the largest distributors had computer systems.

“Computer usage started moving downstream in the later ’70s, and then in 1982, we had the explosion of the PC. That increased the number of companies who felt they could afford automation,” said Epner. “We found out early on that if you don’t solve business problems for customers, all the technology in the world ain’t nothing.” Some of the earliest automation, Epner pointed out, helped distributors pick items faster and moved the industry beyond “fixed-location” stocking to a “random stocking” method that matched customer demand.

Many inventory management systems have evolved to become a component of larger enterprise resource planning (ERP) programs with wireless data identification solutions such as bar coding, signature capture and voice recognition tools for tracking stock.

“Because our system handles electronic ordering and invoicing and sales order entry selection/sorting capabilities, we have reduced invoice transactional costs significantly and our customer service is more timely, efficient and accurate,” said Jay Platt, president of Platt Electric Supply Co., Beaverton, Ore.

In the business of shopping and holding product, there is a fine balancing act between always having enough of the right product on the shelves to satisfy customers and never having too much overstock. To achieve equilibrium today, automation is being used for a myriad of functions such as receiving, assigning stock location, order picking, batch processing, selective order release, item location tracking, low stock reporting and shipping and bar code labels.

New Castle, Del.-based United Electric Supply has 10 branches in Maryland, Delaware, New Jersey and Pennsylvania. The company uses item bar coding for product identification and location. Order bar coding is used for tracking customer shipments. The distributor also employs signature capture capabilities and radio frequency scanners for retrieving proof of delivery.

Automation plays a significant role in United Electric’s ability to meet customer needs. “As items are scanned upon receipt from our suppliers, our automation system prints out shipping tickets for any items backordered against the purchase order. This reduces turnaround time to the customer,” said Crawford.

Walk into a distributorship committed to operational excellence and chances are good that they have also incorporated the Internet to perform such key functions as monitoring order status and inventory flow in a single distribution center or across multiple distribution centers.

At Platt Electric, picking and stocking functions not only require automation for best efficiency, but they also represent the greatest potential for efficiency gains for the wholesale distributor. Currently, Platt uses two picking methods. Automation is used when picking full-quantity branch stock units. A manual process is still used, however, for customer orders that specify a product quantity less than a full case or carton. Fractional quantities require repackaging and new identification.

Where automation has had the highest impact on Platt’s ability to meet customer needs for product availability and flow to the job site has been the implementation of a computer network. Platt employs a Mincron inventory management system to link its more than 74 locations in the Western United States. “Real-time 24/7 access to inventory through a virtual private network, plus our overnight/everyday service has allowed us to reduce inventory and increase by 16 the number of branches we can service across our shipping dock,” said Platt.

Doubly advantageous

Several trends are driving the advent of contemporary warehouse management solutions. Certainly a new generation of managers and owners are more open to early adoption of inventory efficiency technologies—especially those aimed at boosting their ROI. Flattening margins are also forcing organizations to identify new ways to add value to individual customers to increase sales.

According to Dean Jester, president of TradePower, a leading distribution solutions provider, distributors are under constant price pressure. “Historically, computers and metrics have been very effective in providing a pricing solution to gross margins. However, profitability can’t be managed by internally focused ‘turn and earn’ alone anymore.”

Jester says most contractors and many industrial and commercial organizations have not invested in the tools or the discipline to maintain accurate, updated inventory and distributors who have their technology building blocks in place can help implement processes that will help customers manage their inventory and significantly reduce procurement costs.

“Distributors who take a vendor management approach to replenishing inventory for a warehouse, storeroom, service truck or job site can reduce costs for both parties and will add true long-term value to a contractor’s operation,” he noted.

United Electric uses TradePower software to facilitate its Supplier Inventory Management System (SIMS), a fully automated inventory management program for customer storerooms and job sites. According to Judie Romano, manager of contracts and integrated supply services for United, SIMS is designed to decrease total acquisition and possession costs of electrical commodity items by automating inventory procedures at a customer’s place of business or on-site supply trailers.

“Storerooms and trailers are stocked with material and assigned order points. Reorder quantities are based upon an item analysis managed by United Electric employees utilizing a bar code scanner system similar to our in-house program,” said Romano.

The next generation

Some distributors believe the next wave of warehouse inventory management technology with the potential to improve business with electrical contractors may literally be in the stars. United Electric believes real-time delivery information utilizing a global positioning system (GPS) would provide delivery information before drivers returned with signed receipts.

A wish list of future advancements could create even greater opportunities for contractors, said United’s Crawford. “An ideal technology system would automatically send our customers an electronic notification of any backordered item on their purchase order. Additionally, it would be capable of providing the customer with the date the material is due from the manufacturer if it is currently on order. If it is not on order, the system would update the customer once the supplier confirmed a delivery date to us.”

For Platt Electric, the ability for contractors to use palm devices to scan barcodes or electronically transfer orders directly to job sites could enhance delivery logistics and reduce lost time for the contractor. The company also predicts that radio frequency identification technology will play a growing role in inventory accountability.

Perhaps the next generation of technology will be driven less by the influence of a particular tool or procedure, but more by a new generation of people. Epner has identified a significant generational change taking place especially among family-owned distributors.

“There are a lot of owners nearing retirement age who are not comfortable with computers except as a necessary evil, yet a whole new group of generation X, Y and Zers who have grown up with computers are taking over their family businesses. I am seeing a trend that as the younger generation turns 30 and 40 and takes more responsibility, they are forcing more and more unique automation that is causing some rapid changes in the industry,” said Epner. EC

MCCLUNG, owner of Woodland Communications, is a construction writer from Iowa. She can be reached via e-mail at mcclung@lisco.com.

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